The Best Metals Market

Though he is bullish on gold and silver for the long term, there is another, less well known metal that trader Dan Gramza likes for the long haul.

Dan, let’s talk about the metals complex. You’re a commodity expert. What do you think is the best long-term play there?

Well, right now we’re seeing gold and silver struggle. We may see that over the next few months. Long-term, I’m bullish those markets.

I think another market that I’m really fascinated with is copper. Copper is an interesting benchmark for our economy. It’s an interesting benchmark long term—I’m talking long term, over the next few years.

Three to five years?

Yes, that’s exactly right, Charles. I think that it has the potential for being the next "red gold" market, in that sense.

If we look at copper, if we stay with that one just for a minute, the demand that we have for copper is really going beyond the supply that we have available. I think long term, we have a potential for that.

If you think about China…let’s look at the countries that consume a lot of copper: China, the United States, Germany. China is right now expecting over the next three to five years, up to 350 million people to move to the city from the farm.

Those people are going to want to buy things they currently don’t have right now, so domestic consumption of products that is not there today is going to be huge. Plus, they still have to produce stuff that we buy. To give you an example where China fits in, they have purchased so much copper from Peru they’ve increased their GDP by 10%.

The issue we have right now if you look at supplies, you look at demand going down the road, it’s not enough there to meet demand. In a new car, 40 to 90 pounds of copper is used in a new car, depending on the model.

How much could you see copper rise in the next three to five years, given that kind of long-term time horizon?

Oh, I think we could look at four to five times the levels that we are right now.

What about in the shorter term? Do you see a downside, and if so, would you put in stop losses?

Here’s what I see on copper right now. I’m bullish on copper right now. I’m looking for copper to get stronger over the next few months.

The reason for that is it goes back to perception. If the US stock market does get stronger over the next few months, which I believe it will, then we’re also looking for China’s demand to stay or increase. We’re looking for that upward pressure on copper.